A basic explanation of economic productivity is ‘the value that each worker adds to the economy’. In this regard it is closely linked to wages.
PwC’s most recent NI Economic outlook concluded that ‘NI is achieving impressive job growth but is doing so without any substantial growth in real wages, productivity or living standards’.
Our economy is made up of too many low-paid jobs in the service industries and not enough high-skilled jobs which add significant value, such as IT or sophisticated manufacturing.
Despite our record levels of FDI, too much of it is of the call centre variety and not enough from the googles of this world. The result is too many people who are effectively working poor.
There are different arguments as to why we are suffering from low productivity, but the policy levers at the disposal of the Northern Ireland Executive dictate that our local focus must be on improving our skills base, promoting equality of opportunity and subsequently changing the type of investment we are attracting and the indigenous companies we are growing.
And this is where we have a real problem. The current Executive’s approach to the economy and our budget is in many areas going in the opposite direction to what is required to improve productivity.
The deal on welfare reform, which appears to have reached a potentially terminal impasse, if implemented, will cost this Executive some £565 million over six years.
Similarly the Executive is borrowing £700 million to implement a voluntary exit scheme, when a recruitment freeze in 2011 would have created the same result, with no cost.
Both these positions can be defended, but when you consider that at the same time we are hollowing out the voluntary and community sector, losing much of its early intervention and educational work – which leads to vastly improved educational and social outcomes, greater equality of opportunity and ultimately greater economic productivity – the outlay of over a £1 billion seems a serious opportunity cost, not just to our economic productivity but to many of the families trapped on welfare. On top of this we have cut the skills budget and university places, launched an economic inactivity strategy with no funding, have 64,000 empty school places, and have too many graduates with qualifications which don’t match the jobs market or a 21st century economy – our inability to truly grasp the productivity problem is a problem.
It is true that Corporation Tax has the potential to attract many higher value added jobs. However, if we do not have the skilled school leavers and graduates to fill the new posts, the level of investment will be a lot lower than many are hoping for.
Recently, however, I hosted a seminar at Parliament Buildings organised by the ICT educational company Wholeschool which illustrates an innovative approach. Wholeschool works with local schools to ensure their ICT teaching keeps apace with global developments in technology and the ICT industry. This is vitally important work which ensures school leavers are on the pulse of a fast moving and globalised sector.
I was particularly pleased that a school from my own constituency of South Down, St Patrick’s Grammar, outlined the work it has been doing with Wholeschool to ensure its ICT teaching is cutting edge and also how it works with local primary schools to introduce coding – a vital step to ensuring young children are preparing for the economy of the 21st century. Greater partnership work between businesses and educational institutions to boost outcomes for our children and increase their job prospects is crucial.
We should encourage more of this type of entrepreneurialism and embolden our businesses to get more involved in their local communities.
Such interaction will improve educational outcomes, equality of opportunity and ultimately our economic productivity. And best of all, it does not rely upon the Northern Ireland Executive to deliver it.